EU & Italian International Tax Law Blog : International Tax Lawyer & Attorney : Marco Rossi Law Firm : Italy, New York, European Union, EU

Italy's Supreme Court in ruling n. 12295 of May 19, 2010 rules in favor of the tax administration in a case in which the tax administration challenged the foreign tax residency of an Italian taxpayer and assessed taxes and penalties of about 6 billion lire on a total amount of 4 billion lire of unreported income. The taxpayer maintained the position that he had established his tax residency in Monaco and received several payments through a Dutch holding company to which he had assigned his right to use his professional image for advertising and sponsoring contracts. The tax administration argued that the taxpayer while transfering his registered address in Monaco had maintained his actual domicile in Italy, where he had most of his personal, professional and economic ties (including a house, bank accounts, memberships in local clubs). The Supreme Court accepted the tax administration's position, holding that when Italy remains the taxpayer's center of main interests, Italy is taxpayer's tax residency despite the registered address has been move abroad. Italy now applies a provision according to which, when a taxpayer establishes his or her registered residency in a low tax jurisdiction, the taxpayer bears the burden to prove that the foreign residency is also the place in which the taxpayer regularly lives and maintains the main center of his or her interest.        

• Email This
• Print
• Comments
• Trackbacks

A decree with extraordinary budget correction measures for a total amount of twenty five billion euros has been presented to the Council of Ministers for approval and presentation to the Parliament for final enactment into law. The decree includes some important tax provisions. Among them, there are new provisions requiring that multinational companies engaged in cross-border intra-group transactions prepare contemporaneous documentation in support of their transfer prices for the services and goods provided to their affiliates. Also, the minimum threshold for the duty to report cross border transfers of money is reduced to euro 5,000. Finally, a super black list of jurisdictions that are considered more at risk for money laundering and support to terrorist or criminal activities will be enacted. Italian financial intermediaries, professional advisers and accountants shall not be allowed to do business with entities or individuals who operate in those countries and shall have to disclose any transactions carried out in or with those jurisdictions to the Italian tax administration.             

• Email This
• Print
• Comments
• Trackbacks

The list of customers of the Swiss branch of the UK bank HSBC, prepared by former HSBC employee Mr. Hervé Falciani and offered to governments engaged in investigations on unreported foreign bank accounts and tax evasion conducts, has been delivered by the French prosecutor to the Italian prosecutors and tax officials for investigation on Italian bank account holders.

The list is said to contain 120,000 names, out of which 7,000 names are Italian customers of the bank with potentially unreported bank accounts.

Under Italian law, failing to report foreign investments carries a penalty of 10 to 50 percent of the value of the unreported investments. Furthermore, the assets on the account are presumed to constitute unreported taxable income, and penalties for failure to report foreign taxable income from unreported foreign accounts range from 240 to 480 percent of the tax due. 

Italy enacted an amnesty for the repatriation of undeclared foreign assets which elapsed on April 30, 2010. Under the tax amnesty program taxpayers had the opportunity to declared their foreign assets and repatriate them into Italy without any tax or penalty by paying a substituted tax of 5 to 7 percent.      

• Email This
• Print
• Comments
• Trackbacks

Various foreign banks with branches in Italy that act as intermediaries for the purposes of tax refund applications filed on behalf of nonresident persons received a notice from the Italian tax agency in charge with the refund procedure announcing the application of stricter controls in the processing of the tax refunds. The tax office will require specific information about the beneficial owners of the refund in order to avoid abuses and treaty shopping. The banks shall have to provide the complete personal information about the final beneficiaries of the refunds, including their foreign and Italian taxpayer identifications numbers. In case of trusts or funds, the tax agency will require the taxpayer identification number issued in the residence state as well as in Italy both to entity and its legal representative. As a consequence, if the trust or fund is a fiscally transparent entity that does not have a taxpayer identification number in its own country, the bank may need to provide the information about the final investors or the grantors or  beneficiaries of the trust. The new approach follows recent audits that resulted in the denial of the refund of dividend tax credits to various banks that engaged in dividend washing transaction (for a total amount of about 4.2 billion euro).   

• Email This
• Print
• Comments
• Trackbacks

The Italian tax administration has published its first report on the international tax ruling (advance pricing agreement) procedures carried out in the first five years since the program was enacted in 2005.

The Italian international tax ruling is a special procedure through which a domestic enterprise engaged in international activities or a foreign enterprise engaged in investment or business activities in Italy can agree with the Italian tax administration on the tax treatment of certain important items concerning its cross border activities including amount income attributable to an Italian PE, transfer prices for the exchange of goods or services between affiliated companies, Italian withholding taxes on outbound interest, dividends and royalties (for an overview see Italy's International Tax Ruling.pdf.).

The total applications filed were 52 and 19 agreements have been signed, half of which by foreign multinational companies. The average time needed to go through the procedure and sign the agreement was 20 months. More than half of the rulings on transfer prices are based on comparable profits methods. Overall, the program had a very successful start and there are reasonable expectations for a continuing increase in the use of the program in the future.

• Email This
• Print
• Comments
• Trackbacks

Marco Rossi of Marco Q. Rossi & Associati spoke at the 3rd Annual Pacific Rim Conference of STEP - Society of Trust and Estate Practitioners (www.step.org) that took place in Santa Monica, CA on May 6 & 7.

The Conference focused on planning for United States citizens or United States resident individuals with assets located abroad, development of structures for individuals to hold personal residences abroad, investments in United States real estate held by foreign persons, international enforcement initiatives and planning for multinational families and their businesses (Early Bird - Preliminary Program.pdf).

Marco Rossi illustrated the latest Italian tax amnesty program (Italy's offshore tax amnesty and tax enforcement.pdf), spoke about international tax enforcement in Italy and focused on inbound and outbound planning opportunities through the use of trusts in the light of the new Italian provisions on taxation of trusts in a cross border context (Italian taxation of trusts.pdf).

• Email This
• Print
• Comments
• Trackbacks